You can contribute up to $6,000 to your Individual Retirement Account (IRA) if you have earned income from a job or self-employment and you are under age 72. If you are age 50 or older, you may contribute up to $7,000.
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Traditional IRA Contribution
If your employer does not offer a retirement plan, your traditional (non-Roth) IRA contributions are fully deductible. If you do participate in an employer-sponsored plan such as a 401(k), your deduction for contributions may be reduced or phased out entirely based on your income. File IRS Form 8606, Nondeductible IRAs, if you are not deducting all of your traditional IRA contributions.
Retirement Savings Credit
If you contribute to an IRA or an employer-provided retirement account, such as a 401(k), you may be eligible for a credit. Also, if you’re the designated beneficiary of an ABLE (Achieving a Better Life) account, you may be able to get a credit on contributions to your account. The retirement savings credit can be 50%, 20%, or 10% of your contributions, up to $2,000 ($2,000 each if married filing jointly). You must be age 18 or older to claim the credit and you cannot be a student or be claimed as a dependent on another's return. The credit reduces any tax liability you may have and is in addition to any deduction or exclusion from income for the contribution.
Roth Contributions and Conversions
Contributions to a Roth IRA or 401(k) are not tax-deductible. While you can’t deduct contributions to a Roth account in the year you make them, the earnings and contributions are not taxable when you withdraw them. In addition, there is no age requirement to take distributions from your Roth accounts. If you convert your traditional IRA or 401(k) to a Roth IRA or Roth 401(k), the conversion amounts are generally fully taxable.
Contribute the full amount possible to an IRA account to maximize your retirement savings.
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